ICAEW ACA Sustainability and Ethics cheat sheet

Three scopes of GHG emissions (GHG Protocol): Scope 1 = direct emissions from owned or controlled sources (combustion, company vehicles, fugitive refrigerant leaks); Scope 2 = indirect emissions from purchased electricity, heat, steam or cooling; Scope 3 = all other indirect emissions in the value chain, split into 15 categories (purchased goods, business travel, use of sold products, investments, etc.).

Scope 2 has two reporting methods: location-based uses the average emissions intensity of the grid where consumption occurs; market-based uses contractual instruments such as renewable energy certificates, supplier-specific rates or residual mix. Report both; the market-based figure reflects procurement choices.

Emissions (tCO2e) = activity data x emission factor. Example: 500,000 kWh x 0.2 kgCO2e/kWh = 100,000 kg = 100 tCO2e. Convert units before multiplying and state the factor source and year.

GHG Protocol corporate standard requires an operational boundary (equity share, financial control or operational control approach) and an organisational boundary; the chosen consolidation approach must be applied consistently and disclosed.

Science Based Targets initiative (SBTi) near-term criteria: targets cover at least 95% of Scope 1 and 2 emissions and, where Scope 3 is at least 40% of total emissions, at least 67% of Scope 3; Scope 1 and 2 aligned with 1.5 degrees C (4.2% linear annual reduction), Scope 3 against well-below 2 degrees C.

TCFD (now absorbed into the ISSB) rests on four pillars: Governance, Strategy, Risk Management, and Metrics and Targets. Strategy disclosures require climate-related scenario analysis, including a 2 degrees C or lower scenario, and identification of physical and transition risks.

Physical risks are acute (flood, wildfire, storm) or chronic (sea-level rise, temperature change); transition risks are policy and legal, technology, market and reputational. Both feed into financial planning, asset impairment and going-concern assessments.

IFRS S1 (general sustainability disclosures) and IFRS S2 (climate) require disclosure of governance, strategy, risk management, metrics and targets, plus Scope 1, 2 and 3 gross emissions, and industry-based metrics. IFRS S2 requires the entity to use climate scenarios and disclose resilience of its strategy.

Net zero versus carbon neutral: net zero requires deep reduction of emissions across all scopes with only residual emissions removed (typically 90%+ reduction before neutralisation); carbon neutral can be achieved by offsetting without absolute reduction and is a weaker claim.

IESBA Code conceptual framework: identify threats, evaluate them, address them. Five threat categories: self-interest, self-review, advocacy, familiarity, intimidation. Safeguards reduce threats to an acceptable level; if none exist, decline or end the engagement.

Self-interest threat: a financial or other interest (fee dependence, contingent fees, loans) improperly influences judgement. Self-review: re-evaluating your own prior work (e.g., auditing a system you designed). Advocacy: promoting a client's position. Familiarity: long association or close relationships. Intimidation: pressure, threats or dominant personalities.

Independence has two components: independence of mind (state of mind enabling unbiased conclusions) and independence in appearance (avoiding facts a reasonable third party would perceive as compromising objectivity). Both are required for audit and review engagements.

ICAEW Code of Ethics fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. All members must comply; audit adds independence.

Five-step ethical decision model: (1) gather the facts, (2) identify the ethical issues, (3) identify affected parties, (4) identify relevant principles and alternatives, (5) decide and document the rationale. Documenting the reasoning is part of the defence.

Threat escalation route in practice: raise internally with engagement partner or ethics partner; if unresolved, use the firm's confidential whistleblowing channel or the ICAEW Ethics Advisory Service; external reporting to a regulator is permitted where required by law and is not a breach of confidentiality.

Confidentiality exception: disclosure is permitted where required by law (e.g., money laundering reporting, court order), permitted by the client, or there is a professional right or duty to disclose. Confidentiality continues after the relationship ends.

Independence threats from fees: a firm's total fees from one audit client should not exceed 15% of the firm's total fees (or 10% for a public interest entity, with disclosure and safeguards); contingent fees for audit work are prohibited.

Whistleblowing: the Public Interest Disclosure Act 1998 protects workers making protected disclosures; internal disclosure first is preferred, but external disclosure to a prescribed person (e.g., FCA, PRA, HMRC) is protected where the worker reasonably believes the matter is serious.